How to Register a New Business or Company
Any person may set up and operate a business in Singapore.
Registration of Business firms
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Business firms are required to be registered under the Business Registration Act.
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Registration procedures for business firms such as sole proprietorship or partnerships are simpler when compared to that of companies.
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Applicants must first decide on a name for their business and submit the name, with the necessary forms and fees to RCB. The forms can be downloaded from website www.gov.sg/rcb/information.
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Alternatively, you may wish to consider consulting a professional to help with the necessary registration procedures.
Points To Note In Registration of Business
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Every business firm must appoint a director for the management of the business.
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If the sole-proprietor/all the partners are foreigners, the appointed director must be a Singapore citizen, a Singapore permanent resident, a valid Employment Pass holder or a Dependent’s Pass holder [ w.e.f 21 Jun 1999, foreigners are not required to produce an employment pass at point of registration; they only need to apply for an 'Approval-In-Principle' letter issued by the Employment Pass Department (EPD) of Ministry of Manpower (MOM) before they are allowed to be the appointed director, see Form 8 at www.mom.gov.sg].
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To avoid delay in the registration process, you may wish to check with RCB to ensure that the proposed name is not identical to that of another establishment.
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There are some exemptions from business registration, per the Business Registration Act and special licenses to be obtained before they are allowed to operate the business, for details, see www.rcb.gov.sg.
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All businesses come under the Business Registration Act. As such, one should be familiar with the Act before starting on a business. The Act covers key matters relating to operation of a business, from registration issues to cessation of the business, etc.
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All businesses that engage in importing/exporting of goods, trans-shipment and other trading activities must register with the Trade Development Board (TDB*)
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All the above detailed but necessary procedures can be taken care of by a professional if you so wish.
Advantages / Disadvantages of Different Business Entities
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Business firms can either take the form of sole-proprietorships or partnerships, which are distinct from companies.
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Advantages of Sole Proprietorships
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The simplest of all entities – quick to establish and requires only a small registration fee
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Low Capital required – largely depends on the nature of business
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Freedom in management & exclusive use of profits after tax by sole owner
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No filing of annual returns except personal tax returns with the Inland Revenue Dept (IRAS)
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No need for an auditor (for statutory audits) & corporate secretary, hence additional costs savings
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Disadvantages of Sole Proprietorships
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Unlimited liability of sole proprietor – personally liable for all his debts; ie. He may have to sell his personal assets (eg. his house, car etc) to pay for the debts of the business.
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Sole proprietors are personally liable for all wrong doings of the business.
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Limited borrowing powers – Banks normally would not grant loans easily to small businesses unless the borrower has assets to serve as security.
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Continuity or succession problem in the event of sole owner’s critical illness or death.
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Advantages of Partnerships
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Combined resources, expertise & experiences of more than 1 person
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Mutual trust & inspiration with sharing of work load
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Simple & inexpensive when compared to a company – no formality involved in forming a partnership and less legal & accounting fee charges.
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No need for disclosure of its business affairs
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The partnership firm is not tax assessable – profits taxed only in the hands of partners as individuals
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No auditing required on the accounts – benefits of costs savings
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Disadvantages of Partnerships
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Similar to sole proprietor – there is unlimited liability as each partner is liable for all the debts of the partnership. Even after your departure from the firm, you will still be held liable for any debt incurred before your resignation.
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Subject to any special agreement between the partners, the partnership is dissolved upon the bankruptcy or death of any one partner. In addition, admission of any new partners and change in nature of business require the consent of all partners.
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Similarly, a partner cannot transfer his interest in the partnership unless the other partners give their consent.
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Each partner has implied power to bind the other partners in a contract as he is acting as an agent of the business.
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Maximum number of partners restricted to a maximum of 20
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Main Difference between a Business and a Company
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Limited liability concept – While the business firms such as sole proprietorships or partnerships have unlimited liability, the shareholders or owners of a company will have the advantage of ‘limited liability’, ie. the liability is limited to the monetary value of the shares a shareholder subscribes to.
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Legal entity concept – The Company will have the benefit of being a separate legal entity and thus only the company will be sued for its wrong doings, and not the shareholders.
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Transfer of shares – such a transfer in a partnership must obtain the consent of all other partners in a partnership. But shareholders can transfer their shares freely in a company.
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Continuity of business – The existence of a sole proprietorship or partnership is affected by the death or bankruptcy of its member. This problem does not exist in a company as the death of a member or shareholder has no impact on the company’s legal existence.
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Tax – Income of the business firm is taxed individually at scale tax rates while as a company’s profits are taxed at a flat rate of 24.5% for YA2002 (22% for YA2003, source website: www.iras.gov.sg).
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Voice of management – For sole proprietorships/partnerships, business is owned entirely by sole owner or the partners; as such they get to participate fully in the business’ management. However, a company’s is the owner of itself (separate entity from shareholders). Therefore, a shareholder is thus not entitled to participate in the company’s business management.
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Power of contract – Members of a business (partnerships) can enter into contracts with third parties that are binding on other members, but not shareholders of a company. Only the directors of a company have power to enter into contracts with third parties that bind the company.
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Annual Returns – Filing of annual returns with ROC is mandatory for a company. In addition, directors must also prepare/present its financial statements for the company’s annual general meeting.
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Registration of Companies
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While a sole-proprietor has only one single owner, partnerships may have between 2 and 20 partners . Once there are more than 20 partners, the business entity must be registered as a company under the Companies Act, Cap 50.
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A company is different from that of a business firm and usually has the words ‘Pte Ltd’ or ‘Ltd’ as part of its name.
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Any person wishing to incorporate a company is advised to engage a professional, eg a lawyer or an accountant to assist him in the preparation and filing of the company forms/documents for incorporation.
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Procedures For Incorporating A Company
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The Companies Act, Chap 50 requires that a company name must be approved first before the company can be registered. A proposed company name will not be approved if it is identical to, or similar to the name of another local company, branch of a foreign company or business firm.
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After a company name has been approved, the company can be registered by a professional firm / company online via its website, which RCB has launched.
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Points To Note For Incorporating A Company
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A minimum of 2 directors is required when setting up a company in Singapore, and one of the directors must either be a Singaporean, a Singapore Permanent Resident, Singapore Employment Pass Holder or an Approval-In-Principle Employment Pass Holder.
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Under the Companies Act, there are significant sections (s145-168) on key qualifications, responsibilities and liabilities of Directors & Officers, so that they are held responsible and answerable to shareholders on the affairs of the company.
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All directors should take note of these sections under the Companies Act, and a professional (eg. Lawyer or accountant) should be able to clarify and highlight these extracts of the Companies Act accordingly.
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One company secretary must be appointed within 6 months of incorporation of the company as required by the Companies Act.
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The company secretary must meet the following requirements:
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The person must have been secretary of a company for at least 3-5 years immediately preceding the date of appointment as secretary of the company
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A qualified person under the Legal Profession Act, or
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An accountant registered with the Institute of Certified Public Accountants of Singapore, or
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A member of Singapore Association of the Institute of Chartered Secretaries & Administrators, or
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A member of the Association of International Accountants, Singapore Branch, or
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A member of the Institute of Company Accountants, Singapore Branch.
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An Auditor must also be appointed within 3 months from the date of incorporation. Upon appointment, the auditor must continue to hold office until the conclusion of the 1st annual general meeting.
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The following 5 incorporation documents must be submitted to RCB for registration: Memorandum and Articles of Association*
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Statutory Declaration of Compliance
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Certificate of Identity
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Consent to Act as Director & Statement of Non Disqualification To Act as Director
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Notice of Situation of Registered Office and of Office Hours at time of Incorporation
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The above details can easily be taken care of by a professional if you have engaged one to assist in the incorporation of your company.
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* Memorandum and Articles of Association Memorandum contains information relating to the structure of the company such as type of company and its business activities, objects and power
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Under the Companies Act, 2 persons must be named as the ‘subscribers to the memorandum’ whom such persons will be the first members of the company.
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The Articles of Association contains the regulations for managing the company’s affairs.
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It covers matters like how directors should be appointed, the amount of director’s fees, etc.
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Under the Companies Act, the Third Schedule and Fourth Schedule (Table A) are often used as the standard model for a Company’s Memorandum and its Articles of Association.
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Although it is not mandatory to follow the Schedules, most companies have their Memorandum/Articles of Association based them.
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Under section 145 (3) the company’s first directors have to be named in either the memorandum or articles of association. A company may by special resolution alter the provisions of its memorandum with respect to the objects of the company, s 33(1).
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S 33(2) states that where a company proposes to alter its memorandum, with respect to the objects of the company, it shall give, by post, 21 day’s written notice specifying the intention to propose the resolution as a special resolution and to submit it for passing to a meeting of the company to be held on a day specified in the notice.
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Types of Companies Private or Public company
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Private company is locally incorporated where the number of shareholders is limited to 50 or less.
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Exempt Private Company (EPC) is a firm with not more than 20 shareholders who are individuals with a turnover of less than S$5 million. In October 2002, the Singapore government has announced that it had accepted a high level committee’s recommendation to do away with mandatory audit for such EPCs. This is to make it easier for EPCs to set up business and raise capital in Singapore. This will take effect after the Companies Act is amended at the end of 4th quarter of 2002.
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A Public company is locally incorporated where the number of shareholders can be more than 50 members with no upward limit on membership, and the company may raise capital by offering shares and debentures to the public. Its shares are freely transferable and traded eg. on the stock exchange. A public company must also register a prospectus with the RCB before making any public offer of shares/debentures.
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A company by shares
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The liability of shareholders of a company is limited to the unpaid amount of share held.
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Company limited by guarantee
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The liability of members is limited to the amount they individually pledge to contribute in the event of winding up.
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These companies are usually formed for non-profit purposes (eg. charitable organization, religious bodies and societies for promotion of art.)
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A company limited by both shares and guarantee
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A company with unlimited liability
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The liability of members is unlimited
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Branches of Foreign Companies & Representative Office
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These are companies whose country of origin are outside Singapore and who wish to set up a branch in Singapore.
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A foreign company may establish a representative office (RO) in Singapore to undertake promotional and liaison activities on behalf of its parent company. However, ROs are not allowed to engage in business; conclude contracts; provide consultancy for a fee; undertake transshipment of goods; open or negotiate any letters of credit.
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Registration & approval of a RO is under the Singapore Trade Development Board (now known under International Enterprise Singapore) whose parent company is in the manufacturing, trading, trade logistics and trade-related services. For details, refer to https://roms.iesingapore.gov.sg/ROMS/ROMSApp.nsf
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For financial institutions such as banking, finance & insurance, enquiries should be made with Monetary Authority of Singapore (MAS) on registration procedures. ( www.mas.gov.sg )
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Registration of a Branch of a Foreign Company
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Any foreign company carrying on business in Singapore must register itself before doing business or establishing a place for business
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As the registration procedure for a foreign company is rather technical, RCB encourages that the foreign company seeks professional assistance from a firm of local lawyers or accountants.
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After the company name has been approved with the necessary application/fees, there are some key documents to be filed with RCB (along with the General Lodgement forms) as follows :
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Certified copy of the foreign company’s Certificate of Incorporation or registration or a document of similar effect.
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Certified copy of the foreign company’s charter, statute, or memorandum and articles or other instrument constituting or defining the constitution.
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Memorandum of appointment or power of attorney appointing 2 or more locally resident persons (ie. Singapore citizen, Singapore Permanent Resident or Singapore Employment Pass Holder) authorized to accept service of process and any notices required to be served on the foreign company.
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A return by foreign company giving particulars of directors at time of registration. If the return includes directors resident in Singapore who are members of social board of directors, a memorandum duly executed stating the powers of the local directors must be filed.
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Notice of Situation of Registered Office and of Office Hours at time of Incorporation.
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Statutory Declaration by Agent of foreign company.
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A foreign company must notify RCB within 7 days when it ceases business in Singapore. Notice must also be given to registrar within 1 month if a foreign company is winding up or is dissolved in its place of incorporation.
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Other Key Considerations
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Section 201 (1) of the Companies Act requires directors of every company to prepare the company’s profit & loss account and a balance sheet to be presented at the company’s annual general meeting not later than 18 months after the incorporation of the company.
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Subsequently the financial statements must be prepared at intervals not more than 15 months from the preceding accounts. Accounts must be made up to date, not more than 6 months before the date of the meeting.
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S 201(5) also requires directors of a company to present a report with respect to the profit & loss of the company for the financial year and the state of the company’s affairs at the end of the financial year. This serves to inform the shareholders of the company affairs and its financial position for the year.
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S 175 states that every company must hold its 1st annual general meeting within 18 months after the date of its incorporation and at least once a year after that. If the directors fail to comply with this requirement, they are liable to be prosecuted under the Companies Act.
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S 197 requires that the directors lodge the annual returns within 1 month after the date of annual general meeting. Again, directors will be prosecuted in the event of failure to comply. Any person who is persistently in default of the requirement of the Act will be disqualified from being a director or officer of a company for a period of 5 years.
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